Many people dedicate their lives to their business. Usually, it’s their passion, and the build-up of value is the ‘return’ for doing what they enjoy or love.

We are currently seeing a bounce in the Mergers & Acquisition market, and a number of people have benefitted hugely from this. How long will this last though?

It is a common hurdle that individuals who have a business will use it as their retirement fund. This is not only incredibly risky through lack of diversification alone, but a lot of it can be out of your hands due to external factors such as timing or sector movements.

What are the factors that arise when looking to sell your business?

• Is it sellable? Sounds funny, but some businesses aren’t going to be attractive to purchasers based on either the structure, the sector or the size of the business.
• Is there a hidden value? Purchasers often, but not always, acquire firms due to the belief they can achieve more growth from that business than it currently is operating at. This may be a hard question to answer, but fully understanding your business & where it can get to, or where you can get it to, will highlight areas for either partial sale/exit, or other plans to be factored in.
• What are your plans? Acquirers will often want the seller to sign up to an ‘earn-out’, meaning you work an extra year, but 3 years is not uncommon, with part of the exit value unlocked on completion of the earn-out.

Naturally, there are so many other factors that come into the Mergers & Acquisition process however, these are just a few hidden, and sometimes unexpected, reasons why a business sale is either unachievable or made more challenging.

How can this be avoided?

Having 3 years to build up to a business sale is recommended as a minimum. A lot can be achieved in 3 years, but generally, firms will look at the business with the timeframe of roughly 3 years to look at profit, growth in the business amongst other metrics. 

In an ideal world, you set up your business knowing the end goal. You wouldn’t start a journey without a destination, so why would you start a business not knowing what success looks like? That doesn’t necessarily mean sale or exit, but knowing the target means understanding what needs doing, by all stakeholders, today.

This allows people like Coronation Wealth Management & other key advisers to provide contextual advice, allowing for different scenarios and providing advice to mitigate the risk of a business being a pension.

Many financial planners & advisers will talk about cash extraction without providing pragmatism to the business owner. However, in many cases, the business owner may not be considering it because of their business's needs. Instead, they may want to reinvest in the business or would like to avoid the risk of moving money in case of an emergency.

Each business, and owner, is different. Some never want to retire, and some start the business with the aim of exit and retiring. The point is, bespoke financial advice by pragmatic & business-specific financial planners like Coronation Wealth Management, means you have the benefit of someone in your corner to plan for the eventualities & provide back-up plans for various scenarios.

With the right approach and the right advice, anything can be done. The earlier you start to plan, the more work & advice can be forecasted for and maximisation of possibilities can be fully utilised.

Book a meeting with Piers https://calendly.com/coronation-wealth who works with the advisers to provide expertise for business owners.

For more information on our advice for business owners please click here.

For more information on our work with private clients please click here.

Exit Strategies may include the referral to a service that is separate and distinct to those offered by St. James's Place.